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2014 (7) TMI 1111 - AT - Income TaxDisallowance u/s 14A - Held that:- Expenses in respect of exempt income was shown at Rs. Nil, that the assessee had debited direct expenses on account of dematerialisation and STT in the capital account and in the profit and loss account, that AO had presumed that the assessee had must have incurred some expenditure under the heads salary, telephone and other administrative charges for earning the exempt income. It is further found that the total expenditure claimed by the assessee for the year is about 13 lakhs and the AO had made a disallowance of about ₹ 16 lakhs. - assessee had not claimed any expenditure in its P & L account, so, it the onus was on the AO to prove that out of the expenditure incurred under various heads were related to earning of exempt income. Not only this he had to give the basis of such calculation. In any manner disallowance of ₹ 16.35 lakhs, as against the total expenditure of ₹ 13 lakhs (app.) claimed by the assessee in P & L account, is not justified. Provisions of Rule 8D cannot and should not be applied in a mechanical way. - AO had not deliberated upon the facts of the case before making the disallowance, whereas the FAA has decided the issue on merits - Decided against Revenue.
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